Australian business optimism climbs

JamesGlynn

SYDNEY--Australian business confidence is rising as record low interest rates support improved trading and investment conditions--fanning hopes the country may better withstand the end of a decadelong mining boom than expected.

More than two thirds of companies are growing more optimistic about the economy in 2014, following a lackluster year for the resource-rich economy when declining mining investment dragged on growth, a survey by Dun & Bradstreet showed.

Expectations for profit, prices, investment and employment in 2014 also brightened, the survey showed.

Demand for credit is expected to strengthen over the first months of 2014, with 18% of businesses expecting to seek access to new finance--the highest level since late 2011.

"These latest findings further support the picture of an economy that has found its feet following a 2013 of weak and irregular business conditions," Dun & Bradstreet's Director of Corporate Affairs Danielle Woods said. "The increases in hiring and capital investment intentions indicate businesses are preparing for a year of stronger growth."

The survey findings come after the central bank said last week that credit demand picked in November--rising 3.8% on year compared with a 3.5% gain in October, the fastest in more than a year. Home loans, one of the few hot spots in the economy, accounted for most of the gains.

The Australian Retailers Association also reported strong sales through the end of December--with Christmas turnover reaching a record. High-street spending has been among the areas slow to warm to the central bank's eight rate cuts over the past two years.

The Australian economy expanded by 0.6% in the third quarter from the second and by 2.3% on year--much slower than quarterly growth rates of as high as 4% in 2012. Still, Australia is in its twenty-third year of economic expansion.

Still, the Dun & Bradstreet survey raised some concern about inflation, with many companies expecting prices to rise in 2014.

"This is likely to cause the Reserve Bank some concern and is a fundamental factor why we're likely to see a series of interest-rate rises during 2014," said Dun & Bradstreet economics advisor Stephen Koukoulas.

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